Making Sense of Disruption in Wealth Management

June 1, 2018

In the present day, Wealth Management is one of the most dominant sectors in the financial industry. Wealth Management businesses tend to have higher growth prospects and return on investments (ROI) ratios than most other retail financial businesses.

However, the Wealth Management industry is in the middle of a major shift; a new generation of investors have created the demand for modern standards on how wealth management services are delivered. The expectations and inclinations of these investors are shaped by advancement in technologies and their experience of the last financial crisis. Furthermore, rising costs of risk to investor’s funds and wealth management firms alike are making it harder for financial analysts to provide exclusive investment services for the clients.

Today, many Wealth Management firms are trying to determine how to engrain technology within their business models and use it as a tool in the financial services industry. Robo-advisory is one such emerging trend that has come to light in the field of wealth management.

The advantages of robot-advisory are that they provide affordable and reliable financial advice for all investors regardless of their net worth. While some may argue there is no role for robot-advisors in the Wealth Management industry, the truth is that we’ve reached a point where it’s impossible to live without it.

Ever since the widespread penetration of internet and digital devices, investors’ expectations have changed at a rapid pace. Convenience is now a top priority for all businesses. No one wants to waste time in physically visiting a place or talking on the phone to receive financial advice on a daily basis. This has resulted in not only more efficient and effective conduct of business, but also an increase in the number of investors willing to take risks for higher returns. That’s why most wealth management institutions are starting to adapt robot-advisory by altering the way they function.

Just like robot-advisors, another hot technological trend in the financial world is Blockchain. Numerous financial institutions including many major banks have already started exploring Blockchain’s potential in the wealth management industry.

The blockchain is a decentralized ledger which includes a safe and secure record of all cryptocurrency transactions that have been completed. It can be accessed by anyone regardless of the size of his transactions.

The idea behind Blockchain technology can provide a digital source of identity authentication allowing the unified exchange of documents between investors and wealth management institutions including banks. This is likely to bring a rise in automated investment services and reduction in working capital cost, all the while maintaining the privacy of data required by law.

Introduction of Blockchain is paving way for a surge of a cryptocurrency-based financial revolution that is already creating disruption in wealth management industry. The underlying process has also changed when technology replaced paperwork in back offices of wealth management institutions. Cryptocurrency basically is reordering the functioning of financial institutions in such ways we couldn’t envision until now. Although it will take some time for companies to fully entrust the benefits of cryptocurrency to investors, right now only a few can afford transparency as Blockchain technology evolves and is adopted by competitors.

The economy stands at a point where anyone can predict with logical certainty from cryptocurrency-based solutions. Currently, at the dawn of the Blockchain revolution, the major challenge for wealth management corporations is identifying and focusing on sectors which require innovative thinking to adapt to technological changes. If well-established wealth management businesses don’t modify their organizational models to address these setbacks, they may find themselves at a disadvantage in the industry.